- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 1. Rates and Returns
- Subject 2. Rates of Return
CFA Practice Question
A 182-day U.S. Treasury bill has a face value of $100,000 and currently sells for $98,500. Which of the following yields is most likely the lowest?
B. the money market yield
C. the holding period yield
A. the bank discount yield
B. the money market yield
C. the holding period yield
Correct Answer: C
The holding period yield is: (100 - 98.5) / 98.5 = 0.015228. This is less than the bank discount yield: ((100-98.5) / 100) x (360 / 182) = 0.02967. It is also less than the money market yield: (360 x 0.02967) / (360 - 182 x 0.02967) = 0.030122
User Contributed Comments 5
| User | Comment |
|---|---|
| Chl4072 | Why the note never explain money market yield and bank discount yield...? Too simplified... |
| idzani | Assumed knowledge included in this question. I guess this question would be more applicable in the later stages of the course |
| Apoorv34 | I think Calculation of Money market Yield is wrong. It's HPY * 360/days. |
| choas69 | holding period return should 98.5-100/98.5 why is it the opposite ? |
| sunxx320 | @choas69: Face value actually means the 'future value' here. So face value of 100K is in time period t. Currently sells for 98.5K is in time period t-1. That's why the equation is 100k-98.5k. |